In today’s globalised business world, what happens in Shenzhen or Singapore may be just as important as trends closer to home. To that end, I recently offered IDG Connect the following round-up of the past year in APAC, and a few notes on what we can expect from the months ahead. As Apple’s dire performance in China has shown, Asia increasingly matters to Western tech firms, their customers, shareholders and partners:
Asia’s technology market had more global exposure in 2018 than in many recent years. There’s just one problem: most of it was negative. President Trump has begun a de facto trade war with China which has now morphed into a full-fledged stand-off on several fronts, with cyber-espionage and perceived unfair Chinese trading practices at the heart of US grievances. As we head into 2019 expect tensions to increase, with other south-east Asian nations potentially benefitting as US firms pull their supply chain operations from the Middle Kingdom.
It could be an extremely nervy time for Silicon Valley CEOs.
The trade war continues
The tit-for-tat trade war started in 2018 might have so far steered largely clear of tech goods, although some firms have begun to warn of an impact on profits. But the industry has certainly been at the heart of the stand-off between the world’s superpowers. In January a deal between Huawei and AT&T to sell the former’s smartphones in the US collapsed after pressure from lawmakers worried about unspecified security concerns. Then came a seven-year ban on US firms selling to ZTE — the result of the Chinese telco breaking sanctions by selling to Iran, and then lying to cover its tracks. Although part of the ban was subsequently lifted temporarily, it highlighted to many in the Chinese government what president Xi Jinping had been saying for some time: the country needs to become self-sufficient in technology. It was reinforced when Huawei became the subject of a similar investigation.
This is about America, and Trump in particular, fighting back against what it sees as years of unfair trading practices by China. The argument goes that the Asian giant has been engaged in cyber-espionage on an epic scale to catch up technologically with the West, and unfairly forces IP transfers on foreign firms as the price for access to its huge domestic market. Thus, the coming year will see a ratcheting up of tensions. China on the one side will look to increase its espionage in areas like mobile phone processors to accelerate plans to become self-sufficient. And the US will continue to find ways to crack down on Chinese firms looking to access its market — probably citing national security concerns. There are even reports that the US has considered a total ban on Chinese students coming to the country over espionage concerns.
“Technology CEOs the world over with supply chain dependencies in China — so probably all of them — should be increasingly nervous and focused on their firms’ efforts to have viable contingency plans for a US-China technology cold war,” wrote China-watcher Bill Bishop in his Sinocism newsletter. That could spell good news for other ASEAN nations like Vietnam, where Samsung has made a major investment in facilities — although few countries in the region boast the infrastructure links and volume of skilled workers China does.
Cybersecurity takes centre stage
As mentioned, cybersecurity and online threats are at the heart of the Sino-US stand-off. The stakes got even higher after a blockbuster report from Bloomberg Businessweek which claimed Chinese intelligence officers had implanted spy chips on motherboards heading for a US server maker. Although the claims have been denied by Apple, Amazon and the server maker in question, Supermicro, they will confirm what many have feared about supply chain risk for a long time and accelerate efforts in 2019 to move facilities out of China. Further fanning the flames is a US indictment alleging Chinese spies worked with insiders including the head of IT security at a French aerospace company’s China plant to steal IP.
In a move likely to enrage China, the US also recently arrested and charged a Ministry of State Security (MSS) operative with conspiracy to steal aviation trade secrets. A major backlash is likely to come from Beijing. But more could also come from Washington after a combative congressional report from the US-China Economic and Security Review Commission called for a clampdown on supply chain risk and warned of China’s efforts to dominate 5G infrastructure and IoT production.
Aside from state-sponsored attackers, there’s a growing threat from Chinese cyber-criminals, according to one security vendor. Western firms suffer millions of attacks per year from financially motivated Chinese hackers, according to IntSights. Expect that to increase in the future as the state encourages criminals to focus their efforts outside the country, or even to team up with hacking groups at arm’s length. Also expect the country’s Cybersecurity Law to have a growing impact on how Western firms do business there. Ostensibly meant to vet such firms for interference by the NSA and CIA, the law could also serve as a pretext for Chinese officials to access sensitive IP and source code belonging to Western firms operating in China.
For other countries in the region, improving cybersecurity is vital to their efforts to attract more foreign IT investment and nurture start-up friendly environments. Although there are pockets of good practice, APAC is thought to be among the least mature regions worldwide. AT Kearney has called on ASEAN nations to increase cybersecurity spending to around $170 billion, warning that they are in danger of losing $750 billion in market capitalisation otherwise.
The threat from Chinese spies and local hackers is compounded by the growing danger posed by North Korea. Its state-sponsored hackers are acting with increasing impunity. FireEye recently identified a new group, APT38, which was responsible for the attacks on Bangladesh Bank and other financially motivated raids. Expect more attacks aimed at raising funds for the regime, as well as destructive campaigns and politically motivated information theft.
Taking a lead
On a more positive note, APAC is increasingly seen as a leader in emerging digital technologies: led by the two regional giants of India and China but also mature nations like Singapore, Taiwan, Hong Kong and South Korea. Microsoft believes that digital transformation will inject over $1 trillion to APAC GDP by 2021, with artificial intelligence (AI) a key catalyst for growth.
AI continues to be major focus for the region. Singapore is a leader in AI thanks to heavy government investment in schemes such as AI Singapore (AISG) and its AI Speech Lab, while government-owned investment company SGInnovate has recently unveiled its Deep Tech Nexus strategy. India is also is also poised to become “one of the most active centres of expertise in AI” according to experts, thanks to government backing.
Asia is leading the way on smart city projects. Investment in initiatives was set to reach $28.3 billion in 2018 in APAC (ex Japan), and is forecast to reach $45.3 billion in 2021 — partly out of necessity. The region’s cities are forecast to add another one billion citizens by 2040, which will require up to 65% of the UN’s Sustainable Development Goal targets to be met.
India’s Modi government has led the way with an ambitious plan to transform 100 cities, although 2019 will be a crucial year, given that recent reports claim 72% of these projects are still only at the planning stage. Many more examples are springing up all over the ASEAN region, however, from flood awareness programmes in Danang to a free public Wi-Fi and CCTV camera network in Phuket. IDC celebrates some of the best examples each year, showing the breadth of innovation in the region.
However, governments will need to do better in 2019 to tackle major barriers to digital transformation identified by the UN. These include excessively top-down approaches; security, privacy, and accountability problems; and digital exclusion. It claimed just 43% of APAC residents were internet users in 2016. There’s plenty of work for governments and the private sector to do next year.
I might be back in London now but I’m still keeping one eye on the East. My latest for IDG Connect is a piece on whether Hong Kong can really lay claim to the title “Silicon Harbour”, given its dubious track record of under-investment and the increasing strength of rival Asian cities including Tokyo, Shenzhen, Shanghai and Singapore.
Well, as always, the jury’s still out. There are a lot of good things going on in Hong Kong, as this upbeat infographic shows. It’s politically stable, safe from most natural disaster and you can use the internet freely (unlike in mainland China). It’s also well connected internet-wise and relatively cheap, as Frost & Sullivan analyst Danni Xu told me: “enterprises in Hong Kong using 100 Mbps Ethernet Point-to-Point (P2P) per month are paying only one third the price of a similar set up in Singapore”.
“However, despite these advantages/benefits, Singapore remains popular in certain cases over Hong Kong when it comes to selecting a destination to set up a data centre,” she added. “Google was a prime example of this when its plan to establish a data centre in Hong Kong did not materialise. The cost and difficulty of acquiring suitable land were cited as the key reasons for this.”
It also seems like HK’s key strengths, its value as a financial centre and proximity to China, are also its biggest drawbacks. This means Singapore and other cities are usually preferred as regional hubs while HK is the choice as a base for firms looking to expand into China. It also means investors can be reluctant to plough their money into untried or tested tech start-ups as the culture is mainly about finance and property.
Forrester analyst Clement Teo had this:
“There are some structural factors may constrain ICT development in HK e.g. its relatively small domestic market and shrinking manufacturing and industrial sector do not provide sufficient incentives to spur technological developments. Moreover, HK needs to divvy up scarce resources – like land, office space and investment funding and talent – among established economic pillars such as financial services, real estates and retail.”
The HK government this year released an ambitious Digital 21 Strategy – the latest in a long line of such policy documents from the SAR – and certainly talks a good game. But I’m still hugely sceptical whether the political will is there to help smaller tech firms – the start-ups and similar which could genuinely turn the city state into a ‘Silicon Harbour’.
The start of a new year is as good a time as any to begin thinking seriously about a possible career move. Given the very early stage of economic recovery in the UK, there are limited possibilities at home, so what about taking the leap to Asia? After all, it’s one of the global economy’s strongest performing regions and in markets like China there are huge sums of public and private money being invested into IT upgrades and infrastructure projects.
Well, I spoke to several recruitment experts in China, Hong Kong and Singapore to get the low down on the opportunities, but also the challenges for job-hunting ex-pat IT pros.
First up is China. According to Michael Page senior manager Joshua Rafter the job market is stable and growing, with pharmaceutical, healthcare, chemical, retail, automotive and technology sectors growing particularly strongly. Skills in demand include business-facing roles such as project managers and business analysts.
Hong Kong is also looking pretty positive, although more so in the commercial rather than the financial sector. Roles in demand there include app devs, help desk analysts, system admins and business analysts/project managers with ERP skills.
Finally, Singapore will continue to be strong, especially in second and third quarters, with business-facing roles again in demand, although Michael Page manager Michael Nette warned me that ex-pats will only be offered local packages.
“For most multinational and local companies there is a strong drive to recruit Singaporean citizens and then look for talented a foreign candidate if local talent cannot be found,” he added. “The Singaporean government has introduced stricter criteria for government issued Employment Passes and Personal Employment Passes.”
The bad news for ex-pat IT pros is that local talent is strong and getting better all the time, so anything under senior managerial level roles will probably be filled by home-grown professionals. What’s more, in China you WILL be expected to speak Mandarin, or at least to have lived and worked in the country for a time previously. Language skills in international business hubs of Singapore and HK are less important (although would still give you an edge), but job seekers will be expected to do their search from over there, so it’s going to take a leap of faith.
“Be stationed in Hong Kong for a extended period. Visiting for only a week or applying for jobs from abroad make it very difficult to secure a role in Hong Kong,” said Michael Page regional director Christopher Aukland. “A lot of expats find roles through networks rather than applying directly – therefore being here in person to network extensively is critical.”
The days of the cushy ex-pat package are pretty much gone, so expect local wage scales and lots of competition, unless you’re lucky enough to get a transfer out here with your current employer. That said the experience gained – both life and work-wise – will be invaluable for future career prospects, so it’s well worth a punt if the time is right for you.
You might even end up never leaving.
Last week APT and anti-malware firm FireEye announced the creation of a new Cyber Security Centre of Excellence (CoE) in partnership with the Singaporean government. It didn’t make many headlines outside of the city state but I think it’s worth a second look for a few reasons.
First up, FireEye is pledging 100 trained security professionals to this new regional hub, to provide intelligence to help the local government protect its citizens and infrastructure from attack as well as benefitting the vendor’s customers across APAC.
FireEye is one of the few infosec companies I’ve spoken to in this part of the world that is prepared to talk at length about the specific problems facing organisations in the region. More often than not when I try to go down this avenue with a vendor I’ll be told about how threats are global these days and attacks follow similar patterns no matter where you are on the planet.
While I know this is true to an extent, it was nevertheless refreshing to hear FireEye’s APAC CTO Bryce Boland tell me that the reason for building a team in Singapore was to have the necessary local language and cultural skills to deal with specific regional threats.
“We have a lot of countries here, many of which have tense relationships, so we see a lot of that boil over into cyber space,” he told me.
As well as the various hacktivist skirmishes that periodically hit the region, such as those between the Philippines and Indonesia or China and Japan, there are also more serious IP-stealing raids which stems from the fact that APAC represents more than 45 per cent of the world’s patents, Boland added.
As a result, regional organisations face almost twice as many advanced attacks as the global average.
Another reason the news of FireEye’s new CoE warrants attention is what it says about the approach to cyber security by the respective governments of Singapore and Hong Kong.
Although Hong Kong threw HK$9 million (£730,000) at a new Cyber Security Centre in 2012, my impression is that Singapore is more proactive all round when it comes to defending its virtual borders.
It was a view shared by Boland, who pointed to Singapore’s ability to attract and support infosec players looking to build regional headquarters there, as well as its efforts to attract globally renowned speakers to an annual security expo.
In my experience, what few events there are in Hong Kong are poorly attended, attract few speakers from outside the SAR, and rarely provide the audience with anything like compelling or useful content.
The big news from the Orient this week, or at least this small part of it, has been Google’s decision to pull out of plans to build a $300 million datacentre in Hong Kong.
Now the web giant claimed this was due to high costs and the difficulty of getting enough land for its requirements, which at first glance seems fair enough. It ain’t cheap here and land is at a premium in the tiny SAR.
However, the more I think about it the stranger it seems, and here’s why.
- It’s not short of a bob or two – was cost really the reason for its decision?
- The project has been trailed way back since 2011 when Google announced it bought 2.7 hectares of land in the Tseung Kwan O Industrial Estate near Sai Kung, although interestingly a link to the Google page on it now results in a 404 error message.
- At the time, Google said: “We chose Hong Kong following a thorough and rigorous site selection process, taking many technical and other considerations into account, including location, infrastructure, workforce, reasonable business regulations and cost.”
So what’s changed?
Mainland China is admittedly a small market for Google and that probably won’t alter unless there’s an unimaginable change of heart from Beijing. But it knew that back in 2011 when it bought those 2.7 hectares of land that are suddenly deemed not enough.
It’s more likely that with projects underway in Singapore and Taiwan, Google is concentrating on those first to ramp up its datacentre presence in the region.
We must remember it’s still a baby in the IaaS space when compared with the AWS behemoth.
But I personally wouldn’t rule out a return to the HK project for Google in the future as it looks to grow its Google Compute Engine offering in the future. Rival Rackspace has been steadily building out its operations from Hong Kong, for example, recently launching its first public cloud service in Asia from the former colony.
It must be added that Google already has a healthy complement of servers in the SAR and recently announced a tie-up with the local Chinese University of Hong Kong, so rumours of dissatisfaction with and interference by the local government may be wide of the mark.
However, news of the pull-out will still be a big blow to the Government CIO’s Office as it tries to sell HK over its near neighbours as Asia’s premier datacentre destination.
If any more PR blows like the Google story start landing next year, it might be time for the HK government to rethink its strategy.
I was in Singapore this week for a big Intel announcement, ably covered by my Reg colleague Timothy Prickett Morgan here. That left me with no news but a bit of wriggle room to consider the bigger picture: just where is Big Data headed, what’s the big deal with Hadoop and is Intel really a software company now?
Well, let’s take the last question first. Yup, Intel has been a software company for several years now actually. It was the $7.6bn acquisition of security giant McAfee which really sealed the deal though and its roadmap for taking security capabilities down to the OS and chip level is taking shape nicely. This week’s big news was that Intel is getting into the Hadoop game with its own distribution of the open source Big Data management framework.
It’s a smart move for Chipzilla, helping to drive extra revenue and boost take-up of its Xeon chips. According to global director of Enterprise Computing, Pat Buddenbaum, however, there was another reason for the move, namely “to instill confidence that Hadoop will remain open”.
“One of the concerns was that its primarily driven by start-ups with venture backed direction, which may fork from the 100 per cent standardised open source path,” he told me.
Intel as open source saviour? Well you can be sure that commercial interests were probably its primary motivator here, and it has no plans to make similar moves for other open source frameworks which may be at risk of forking.
So what about Big Data? Should you believe the hype? Well, although even Buddenbaum admitted it was a bit of a buzz word, the premise behind it is sound. It’s about organisations making sense of the vast quantity of data – be it internal or external, customer-related data – literally inundating their datacentres, in order to drive business growth and improve agility in realtime. Analysts I spoke to are in agreement that the Big Data trend is a positive one and Intel’s move will benefit the industry. Now it’s up to the OEMs, SIs, and ISVs to play their part and enable the democratisation of Big Data by pushing Hadoop down to the mass market via their products and services.
Don’t hold your breath though. The industry is at such a nascent stage that, according to Intel’s APAC Datacentre Products GM Jason Fedder, it’s not even clear which region if any is ahead of the curve. In the meantime the hype will continue as long as IT vendors (excluding Intel, of course) think they can flog some extra units on the back of this latest buzz word. But I’m pretty confident that in a few years’ time we won’t be talking about Big Data anymore – not because it will have fallen from favour but because it will be ubiquitous.